Pros and Cons of Staff Augmentation in 2023

Staff augmentation is a time-tested, proven staffing model to evaluate as a potential addition to your organization’s flexible talent management plan. Designed to temporarily supplement an in-house team with qualified resources, it can be a cost effective way to meet project deadlines and objectives, and address skill set gaps.

With corporate hiring freezes and market uncertainty during these unprecedented times, now more than ever, companies need to be flexible, agile, and responsive to changing market dynamics and customer needs. Part of achieving this involves assessing flexible talent management strategies. They should address short-term staffing needs and provide a functional framework to add and remove staff in an efficient, timely, and cost effective manner. There are a few ways to accomplish this. Staff augmentation is one that has proven successful for years.

What is staff augmentation?

Staff augmentation increases the talent capacity of an organization with high-quality temporary workers or contractors who have the right skills. These short-term engagements are usually filled through a staffing agency or an online talent platform and are paid by the hour. Initially, it was practiced by the IT industry and tech sector verticals to address rapid technology expansion.

Over the years staff augmentation has expanded beyond these sectors and has grown along with the global staffing industry. In 2019 alone, according to a Staffing Industry Analysts market report, the global staffing industry, one of the main providers of staff augmentation, generated $500B.

In part, this associated market expansion is due to staff augmentation being applied to almost any industry today as a cost effective way to address short-term staffing needs. For example, marketing executives and managers are choosing staff augmentation as a creative way to temporarily add production capacity to their existing team for a new marketing campaign, product launch, or rebranding initiative. A specific example is Woodruff Sawyer, one of the largest insurance brokerage and consulting firms in the United States. The company chose staff augmentation to expand its marketing team with additional bandwidth to undertake a major rebranding initiative with great success.

Different staffing models compete with staff augmentation, such as traditional outsourcing and managed services. It’s important to understand the difference. With both traditional outsourcing and managed services, contracted labor is compensated based on deliverables and specific outcomes versus by the hour. With outsourcing services, your company is less involved in the day-to-day execution of the desired deliverables.

Staff augmentation is often a successful solution for filling temporary gaps. Additional staffing may be required for a variety of reasons. For example, when a software developer needs to bring a new application to market in record speed but identifies a skills gap in the existing team to do so,  staff augmentation may be the ideal solution.  Or you may simply need to add temporary head count to manage work overflow. An example of staff augmentation applied to the healthcare industry is the short-term addition of nurses to an existing  team to help with surges in patient volume.

Although staff augmentation works well for many companies, as with any organizational hiring strategy, there are advantages and disadvantages. Awareness of the pros and cons helps businesses adopt the staffing strategy that will work best in their organization.

Pros of staff augmentation

Staff augmentation offers a flexible, creative solution for increasing resources within an existing team for greater short-term capacity. It also provides a swift way to bring in talent that fills a skill set gap without a long-term employment commitment. But there are more advantages, including intangible benefits such as keeping in-house teams focused on production and deliverables versus worrying about new hires with more skills replacing them. For many organizations, the benefits of choosing staff augmentation are varied and compelling, including those outlined below.

• Expertise. Staff augmentation can be an ideal solution when a project requires a skill set your current organization does not possess. It is especially effective if the required skills will not be needed long-term.
• Quickly scale personnel up or down. As we navigate through the unchartered waters of a global pandemic, the ability to swiftly and efficiently scale resources in any direction on demand is a major benefit. Staff augmentation helps add resources when and where they are needed, and it potentially enables an organization to quickly scale down when necessary with less impact on direct hires.
• Staffing flexibility. Staff augmentation generally makes it easier to add to an existing team more quickly and efficiently. Once a staffing agency or an online talent platform provider understands a company’s needs, they can choose from a portfolio of contractors and place those that are the best match. Staff augmentation also makes it easier to replace people that are a mismatch for the job or company, or who are underperforming.
• Cost reduction for training. Onboarding new direct hires requires time and company resources. With staff augmentation, one of the objectives is to boost the current workforce as seamlessly as possible. The goal is to supplement full-time employees with people who have different skills for a period of time rather than onboarding and assimilating new hires.
• Internal acceptance. Let’s face it, employees may feel threatened when a new permanent hire comes on board, especially if they possess a sought-after skill set that meets the current project or program needs. Staff augmentation, which adds talent on a  temporary basis, can help remove this concern.
• Overhead cost savings. Depending on variables, it is estimated that employees with a full suite of benefits typically cost 1.25 to 1.4 times the salary. Taking on a temporary resource via staff augmentation enables a company to circumvent certain long-term costs and overhead.
• Engaging on a trial basis. Sometimes hiring a new employee with the right skill set makes sense, especially if a short-term project becomes a long-term program. Staff augmentation enables companies to try out potential team members in the work environment to see if there’s enough need to warrant hiring an employee and to determine if an individual is a good fit before offering a permanent position.

Cons of staff augmentation

As great as staff augmentation sounds, it’s not perfect for every scenario. Staff augmentation requires changes and additions to internal processes and tools compared to standardized processes developed for direct hires. Plus, issues can arise when staff augmentation turns into a go-to model for longer term projects, including higher costs and higher risk when a service level commitment is not fully defined.

• Oversight and management. Any expansion of a team and resources requires oversight and processes. This includes temporary workers added via staff augmentation.
• Onboarding external talent. Typically, less time and effort is required for staff augmentation onboarding than it is for hired employees, but it is not nonexistent and some level may be involved.
• No institutional knowledge. Some projects require a depth of historical knowledge that only existing employees have. Someone new may have to be educated and ramped up, depending on the project.
• Higher long-term labor costs. When using staff augmentation the placement agency collects fees and the talent is paid as well. So, over time, staff augmentation contractors may cost more than permanent staff performing the same job function. In the short-term, the reduction of hiring/de-hiring costs may offset the increased labor cost.

Is staff augmentation right for your organization?

Before choosing staff augmentation, it is important to review it and compare competing staffing models such as managed services and project outsourcing mentioned earlier.

Start by carefully assessing and defining your company, departmental, or project goals, staffing requirements, skill gaps, and budget with risk exposure contingencies, as well as project timelines, milestones, and hard deliverables. Consider your organizational culture and structure as well.  Will one or more of these staffing models fit into the existing framework more easily or will changes in oversight, management, and/or processes be required? If so, identify variances in these requirements among the models.

Based on the information and data gleaned through this kind of comparison and analysis, a preferred staffing model will likely emerge. Keep in mind it may vary from project to project. Spending time up front to complete a thorough needs and solution evaluation will help ensure the decision you make is the best one.